November 30th, 2009
Look for our market outlook quoted in the December issue of Futures Magazine!
We have been reminding readers of the infamous Thanksgiving rally for weeks but this year it just wasn't meant to be. A poorly timed announcement in regards to a plea for a Dubai debt restructure sent equities swooning in thin holiday trade.
While many American's naively assumed that because the New York Stock Exchange was closed for business their equity holdings weren't changing value, the futures markets were in panic mode. At one point in overnight futures market trade, the S&P was down nearly 50 handles from its close on Wednesday. Luckily, the markets quickly gathered composure and ended Friday's session with hefty but not crippling losses.
In our opinion, the market's reaction to the Dubai World news was grossly exaggerated by the holiday. Had the announcement come during a more "normal" trading session things might not have been nearly as volatile. Additionally, it is likely that many traders that were long the markets placed their sell stops ahead of the holiday weekend leaving the market vulnerable to large and irrational moves on sell stop running. In the larger scheme of things, the markets have failed to trade on fundamentals in recent months and that trend seems to be intact.